A reader asked us this week about the personal savings rate. Most people can sense that something is wrong if the rate is in a long-term falling trend, or if it falls too low (whatever level that may be). We argue that falling savings is part of the larger process of capital destruction. And unfortunately, […]
Do you want to lend your hard-earned money to the US government? In exchange for the high, high interest rate of 2.8%? It’s a most generous deal, even though the Federal Reserve is committed to dollar devaluation at the rate of 2% per annum. So you are getting 0.8% per year, assuming that the Fed […]
The dollar is failing. Millions of people can see at least some of the major signs, such as the collapse of interest rates, record high number of people not counted in the workforce, and debt rising from already-unpayable levels at an accelerating rate. I am going to share a little bit about myself and my […]
Listen to Keith give his talk “The Heat Death of the Economic Universe” here. Physicists say that the universe is expanding. However, they hotly debate (OK, pun intended as a foreshadowing device) if the rate of expansion is sufficient to overcome gravity—called escape velocity. It may seem like an arcane topic, but the consequences are […]
Warren Buffet famously proposed the analogy of a machine that produces one dollar per year in perpetuity. He asks how much would you pay for this machine? Clearly it is worth something more than $1.00. And it’s equally clear that it’s not worth $1,000. The value is somewhere in between. But where? This leads to […]
Last week, we discussed the marginal productivity of debt. This is how much each newly-borrowed dollar adds to GDP. And ever since the interest rate began its falling trend in 1981, marginal productivity of debt has tightly correlated with interest. The lower the interest rate, the less productive additional borrowing has in fact become. Let’s […]
Last week, we discussed the ongoing fall of dividend, and especially earnings, yields. This Report is not a stock letter, and we make no stock market predictions. We talk about this phenomenon to make a different point. The discount rate has fallen to a very low level indeed. Discount in stocks is how you assess […]
Larry Parks is Executive Director of Foundation for the Advancement of Monetary Education. Some of the topics covered in this interview include: What isn’t the problem with the Fed and the dollar? Forget about the spin, what is the real purpose of the Fed? What does it do to labor? What does it do to […]
Interest rates have been falling for over three decades. Conventional economics has two things to say about this. One, inflation expectations are falling. Monetarists believe that the interest rate is set based on bond traders’ predictions of future price increases. Two, if employment and GDP are weak, then the central bank should increase the money […]
An interesting article on MarketWatch today caught my attention. The subhead is the money quote, “Back in April every economist in a survey thought yields would rise. Guess what they did next.” Every? The article refers to 67 economists polled by Bloomberg, all of whom would seem to believe in the quantity theory of money. […]
